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"Silver Tip" oil well gusher, 1909 (Photo credit: Wikipedia)

Following up on last week’s piece detailing the reasons why the Shale oil and natural gas boom has taken place in Texas, but not in other states like California and New York, we’ve seen quite a bit of interesting, related news pieces over the last several days.

On Monday, the Wall Street Journal published a very informative op/ed in its Review & Outlook section, titled “A Tale of Two Oil States”, which made more detailed comparisons between the economic performance between Texas and California, and the ways in which each state’s policy decisions related to shale development have affected that performance. Here is a key passage:

The two richest fields are the Eagle Ford shale formation in South Texas, where production is up 50% in the last year alone, and the 250-square mile Permian Basin. Midland-Odessa in the Permian is one of America's fastest-growing metro areas.

More than 400,000 Texans are employed by the oil and gas industry (almost 10 times more than in California) and (Texas Railroad Commission Chairman Barry) Smitherman says the average salary is $100,000 a year. The industry generates about $80 billion a year in economic activity, which exceeds the annual output of all goods and services in 13 individual states.

Now look to California, where oil output is down 21% since 2001, according to Energy Department data, even as the price of oil has soared and now trades in the neighborhood of $95 a barrel.

This is not because California is running out of oil. To the contrary, California has huge reservoirs offshore and even more in the Monterey shale, which stretches 200 miles south and southeast from San Francisco. The Department of Energy estimates that the Monterey shale contains about 15 billion barrels of oil, which is about double the estimated supply in the Bakken.

So you look at that information, and you can’t help but wonder why in the world California policymakers, whose state faces intractable annual budget deficits and constantly growing welfare rolls, would wish to discourage the growth of an industry that pays an average salary of $100,000 a year, especially given that Governor Jerry Brown has made it clear he is in favor of increased development. You’d think that if Gov. Brown gets it, then folks in the state assembly must get it as well, right?

Well, not exactly.

As detailed by Todd Woody in a piece subtitled “No Fracking Way Dude”, some members in both houses of the California state assembly are attempting to move a series of proposed bills that, if passed, would effectively shut down development of California’s massive Monterey Shale formation, which holds an estimated 15.4 barrels of oil, before it really begins. Here is a key out-take from Mr. Woody’s piece:

SB4 would bar the issuance of drilling permits until a scientific study on the environmental impacts of fracking is completed. People who live near fracking operations could request that regulators test well water to ensure drilling has not contaminated drinking water.

As we discussed last week, the “study and delay” strategy exemplified by SB 4 and AB 1323 has become one of the key arrows in the quiver of anti-development groups all over the country. The truth is that the safety of hydraulic fracturing has been studied ad nauseum over the last 5 years, and, despite all the noise and hyperbolic scare tactics employed by anti-frackers, no one has yet been able to demonstrate any real environmental damage caused by this incredibly safe and well-regulated industrial process.

Nor have the anti-frackers managed to blind the citizens of California, or all state lawmakers, to the potential for jobs, economic growth and much-needed tax revenue tied to the development of the Monterey Shale. A just-released poll from the California Business Roundtable and Pepperdine University School of Public Policy found the public supports Monterey Shale development by 46 percent to 29 percent. Meanwhile, lawmakers from the California’s Central Valley – which faces some of the toughest economic conditions in the state and would benefit greatly from shale oil development – are standing with Gov. Brown. “This could bring a whole new generation into the middle class,” Democratic Assemblyman Henry T. Perea said recently. And according to Republican Assemblywoman Kristin Olsen, the Monterey Shale presents “an unparalleled opportunity to bring thousands of permanent jobs back to the Central Valley, which will positively impact individuals, families, schools, roads and other public services while lowering crime rates, growing the larger state economy and providing for greater energy independence.

For his part, life-long oilman T. Boone Pickens has had enough of all the nonsense generated daily in the news media around hydraulic fracturing. Speaking over the weekend at the Milken Institute Global Conference 2013, Mr. Pickens had this to say in an article published in The Daily Ticker:

Pickens refutes charges that hydraulic fracturing or “fracking” has damaged the environment and caused earthquakes in Oklahoma, Ohio and Pennsylvsania. Pickens, who went on his first “frack” job in 1952, says he’s “had no environmental issues” with the more than 2,000 wells he’s fracked over the years.

California isn’t losing out because the wells are running dry: the Golden State’s proven reserves still rival those of oil-rich Nigeria. Rather, that state is falling behind in the energy race by choice; indeed state legislators proudly wear this record on their sleeves. When a federal judge recently blocked fracking in the massive Monterey shale formation pending an environmental review, a Sierra Club chairwoman commented, “We’re very excited. We’re thrilled…. I’m sure the champagne is flowing in San Francisco.”

All that bubbly in San Fran is coming at a cost of opportunities lost and social services withheld from the state’s poor and needy.

Compared to the onset of the recession in December 2007, Texas payrolls have swelled by 586,000 jobs and now number more than 11 million for the first time in state history. In contrast, California’s job growth over the last five years has been among the slowest in the nation, and the state’s payrolls are still down by 586,000 jobs since 2008. So while “Saudi Texas” has added more than half a million new, well-paying shovel-ready jobs, largely because of the state’s shale boom, “economic basket-case” California struggles to create jobs. The Golden State’s payrolls are still more than half a million short of 2007 levels, and are even below the state employment levels back in the fall of 2004, more than eight years ago. It’s a dramatic contrast, and has a lot to do with the differences in approaches to developing the two states’ energy resources, as the WSJ points out.

In a sane world, this would not seem a difficult choice for other states – like New York, instance – to make. But hey, who ever said the world was sane, especially when it comes to the politics surrounding shale oil and natural gas?